US Rig Count Up By 10, More Drilling Activity Seen On Land

In its weekly release, Houston-based oilfield services company Baker Hughes Inc. (NYSE:BHI) reported a higher U.S. rig count (number of rigs searching for oil and gas in the country) than the previous week. The West Texas Intermediate (WTI) oil futures are currently trading at around $48 per barrel.

Analysis of the Data

Weekly Summary: Rigs engaged in exploration and production in the U.S. totaled 424 in the week ended Jun 17, 2016. This was up by 10 from the week before.

The current nationwide rig count is less than half the prior-year level of 857. Notably, the count had peaked at 4,530 in 1981. Inversely, an all-time low was recorded in March and since then the rig count has only recovered marginally.

Rigs engaged in land operations were 398 compared with 388 in the previous week. Inland water activity involved five rigs, flat with the prior week. Offshore drilling was flat at 21 units.

Natural Gas Rig Count: The count rose by one from last week to 86. However, the current natural gas rig count is almost 95% below the high of 1,606 reached in late summer 2008. In the year-ago period, there were 223 active natural gas rigs.

Oil Rig Count: The count was up by nine from the previous week at 337. The number had skyrocketed to 1,609 in Oct 2014 – the highest figure to have been reported since Baker Hughes started breaking up oil and natural gas rig counts in 1987. The current tally is well below the previous year’s rig count of 631.

Rig Count by Type: The number of vertical drilling rigs was up by seven to 53, while the horizontal/directional rig count (encompassing new drilling technology that can drill and extract gas from dense rock formations, also known as shale formations) was up by three to 371.

Gulf of Mexico (GoM): The GoM rig count was up by one to 21 units.

Conclusion

Key Barometer of Drilling Activity: The Baker Hughes data, issued since 1944, acts as an important yardstick for energy service providers in gauging the overall business environment of the oil and gas industry.

An increase or decrease in the Baker Hughes rotary rig count weighs heavily on demand for energy services like drilling, completion and production provided by companies that include large-cap firms such as Halliburton Co. (NYSE:HAL) , Schlumberger Ltd. (NYSE:SLB) and Weatherford International plc (NYSE:WFT) .